Doug
Casey Interviewed by Louis James, Editor, International
Speculator
International
Man

Recently:
Doug Casey
Refutes Common Hesitations To Internationalize

L: Doug,
we talked previously about getting assets out of your home country,
especially the US, where to take them, and what to do with them.
In so doing, you touched on the inevitability of currency controls
just ahead, especially for Americans. Can you tell us more about
that?

Doug: Yes.
I’m quite serious about what I said about “the grim reality
of impending currency controls.” As the global economy continues
to deteriorate, governments will have to appear to be “doing something.”
It’s going to become very fashionable to institute some sort
of foreign exchange control.

Why might
that be? Because obviously, people who are taking their money out
of the country are unpatriotic…

L: Those
bastards.

Doug: That’s
right. Jingoistic Americans naturally, but stupidly, see taking
money out of the country as being unpatriotic. They don’t understand
that it’s mainly those prudent people who will be able to supply
the capital to rebuild a devastated economy later. Besides, getting
money abroad is obviously something that only rich people would
do… and of course, it’s time to eat the rich, as well.
For those two reasons, there won’t be much resistance to controls.
And the state gets to appear to be “doing something.”

And when they
do, more people – at least those with any sense – will
get scared and really try to get their money
out, which will exacerbate the run to the exits. The bottom line
is that if you want to get your money out, the time to do it is
now. Beat the last-minute rush.

I don’t
know what form the exchange controls are going to take, but there
are two general possibilities: regulation and taxation.

The regulations
might take the form of a rule prohibiting you from taking more than
X thousands of dollars abroad per year without special permission.
No expensive vacations, no foreign asset purchases without state
approval.

As for the
taxation, if you want to, say, buy foreign stocks or real estate,
you might have to pay an “Interest Equalization Tax” or some such.
So you could do it, but it’d cost you a lot of money to do it.

Something
like either of these, or both, is definitely in the cards.

L: But
aren’t FX controls something from the past? I mean, where do
they exist today?

Doug: Well,
FX controls have been used since the days of the Roman Empire. A
country debases its currency, raises taxes beyond a certain level,
and makes regulations too onerous – and productive people naturally
react by getting their capital, and then themselves, out of Dodge.
But the government can’t have that, so it puts on FX controls.
They’re almost inevitable at this point.

Almost every
country – except for the US, Canada, Switzerland, and a few
others – had them until at least the ’70s. I remember leaving
Britain once in the ’60s, and a border guy searched me to see
if I had more than 50 pounds on me. In those days, currency violations
in the Soviet bloc countries could get you the death penalty. Things
liberalized around the world with Reagan and Thatcher, and then
the collapse of the USSR. But you have to remember that that was
in the context of the Long Boom. Now, during the Greater Depression,
things will become much stricter again.

Right now,
the US just has reporting requirements. But some places, like South
Africa, make it very expensive and inconvenient to get money out.
South Africa, perversely, may serve as a model for the US.

L: Okay,
so we talked previously about Americans at least setting up a Canadian
bank account and safe deposit box, and better yet going in person
to Panama, Uruguay, Malaysia, or a similar place to do the same.
And once there, you advised getting with a lawyer, either referred
by someone you trust or found through an interview process, to set
up a corporation that can handle your assets and investments for
you. This all needs to be reported, but it’s wise to do it in
advance of the higher costs or other limitations to come.

Doug: Yes.
While US persons must report foreign bank and brokerage accounts, safe
deposit boxes are not – at least not yet – reportable.
This leads me to the biggest and best “loophole” when it comes to
potential foreign exchange controls, and that’s foreign real
estate.

I’m of
the opinion that, broadly speaking, real estate as an asset class
is going to be a poor performer for a long time to come – but
that won’t be equally true across all countries. Real estate
in countries that rely on mortgage debt to buy and sell will continue
to be the worst hit.

People don’t
understand that buying property with a mortgage is just the same
as buying stocks on margin. It’s caused speculative bubbles
and malinvestment. Until the malinvestment in those countries is
entirely liquidated, you don’t want to invest in real estate
in them. But a lot of countries, especially in the Third World,
have no mortgage debt whatsoever. Zero mortgage debt. You want a
piece of property, you pay for it in cash. That keeps prices down
and the market much more stable. And it makes for more interesting
speculations, because if a mortgage market develops in the future,
it could light a fire under prices.

But, from
the viewpoint of FX controls, the nice thing about real estate is
that there is no way they can make you repatriate
it. Other than owning a business abroad, real estate is the only
sure way to legally keep your capital offshore.

L: I
suppose it would be difficult for even Uncle Sam to seize your estancia
in Argentina… not without starting a war.

Doug: Yes.
Although I don’t doubt he’ll be starting more wars as well…
[Laughs]

L: So,
part of your thinking here isn’t just speculative. You’re
talking about strategies for wealth preservation, not just in the
face of foreign exchange controls, but more aggressive, predatory
taxation and confiscation by the state – they can seize your
assets, even real estate, in the US, but not abroad.

Doug: Exactly.
Argentina is excellent from that point of view; rights to real property
are, if anything, better than those in the US. In many ways, Argentina
is culturally and demographically more like Europe than Europe.
Uruguay is also excellent, although culturally it’s like a backward
province of Argentina. Paraguay is quite secure – but a bit
weird as a place to live.

I’m not
currently up to date on the Chilean real estate market, but Chile
is definitely now the richest and most advanced South American country,
and an excellent choice. Brazil is fine. Colombia is improving greatly.
Ecuador has a goofy president, but parts of it are very nice, and
it’s about as cheap as Argentina. Eastern Bolivia is interesting,
actually, despite Morales. Only Venezuela is out of the question
in South America. It’s just a pity they have all that oil, which
is always a corrupting influence.

L: Well,
then, what about Central America? I know you prefer South America
for speculative purposes, but what if someone wants to park a lot
of wealth by buying a couple miles of beautiful beachfront property
in Costa Rica, or some place like that?

Doug: I
was a big fan of Costa Rica for many years… The first time
I went down there was 35 years ago – but it’s a different
place now. Then it was very cheap, and now it’s very expensive.
And it’s totally overrun with gringos. So, Costa Rica is not
of that much interest to me at this point; it’s pleasant, but
there’s limited upside.

I think an
excellent place to be in Central America is Belize. Although culturally
and ethnically, it’s not really part of Central America; it’s
part of the Caribbean.

L: And
they speak English there.

Doug: They
do indeed, though things are changing. The Guatemalan government
has always regarded British Honduras, which is what Belize used
to be called, as part of Guatemala. There have actually been confrontations
between Britain and Guatemala over this. But that’s in the past;
now there’s a different problem. Guatemalans are rolling over
the border in much the same way that Mexicans are in Texas, New
Mexico, Arizona, and California.

So, the character
of Belize is changing, but for the foreseeable future, it’s
still going to be Belize, and I rather like it. Aside from Panama,
Belize would be my first choice in Central America.

The problem
with Central America, however, is that it’s a bunch of small
countries that have historically been very unstable. And culturally
backward. Most are under the thumb of the United States…
there’s a long history of US invasions, most recently in Panama
with Noriega. There are “Frito banditos” running around these places…

The most culturally
advanced country in Central America – not counting México,
of course, since it’s in North America – is Guatemala.
But Guatemala has had huge troubles with violence, which has only
recently come to an end… I hate going through checkpoints
at night, manned by jumpy, uneducated, heavily armed teenagers.

Nicaragua
is the low-cost alternative, but it’s relatively backward. Panama
is probably the best choice. It’s very international, very urban
(in Panama City), and it’s very sophisticated, infrastructure-wise.

If I didn’t
like Argentina and Uruguay so much, I would put Panama at the top
of my shopping list.

L: Got
it. Back to the exchange controls themselves. Do you think people
will have any warning at all? It seems to me that this is the sort
of thing the Powers that Be would want to spring on people.

Doug: I
think it’s going to come out of left field. It always does,
with at most an official denial just before it happens. In August
1971, Nixon devalued the dollar, which immediately dropped against
gold and all foreign currencies. I think there’s a reasonable
probability that the government will do that again. Gold may not
be part of the equation, but they may decide to put in some sort
of fixed exchange rate between the dollar and various foreign currencies.

The reason
for thinking this is simple: with all the dollars outside the United
States devalued by that much, that much of a liability just vanishes
into thin air. And in the short term – it’s never a long-term
fix – US exports would go up. This would “stimulate” the domestic
economy. Imports to the US would go down, which would make for fewer
dollars leaving the US.

L: I
know you hate making predictions, but can you tell us if your guru
sense is tingling on this so strongly that you think it could happen
soon?

Doug: The
timing on this is really unpredictable. These people don’t have
a plan. They’re acting ad hoc to whatever seems most
urgent. All the so-called economists around government today are
really just political hacks. Their world views are totally unsound.

L: With
all the problems the US has, do you think this could happen now?
Could we be reading about new exchange controls on CNN.com this
afternoon?

Doug: Sure.
Although they typically pull these stunts over a weekend. I expect
something of this nature to happen any time between tomorrow morning
and two years from now. If some form of currency controls are not
instituted within two years, I’m going to be genuinely surprised.

So if you’re
going to take action, you should start heading for the exits now.
Not next month, and certainly not next year.

L: For
those who don’t take action until it’s too late, under the
scenarios you mentioned, they’ll still be able to get money
out. It’s just that it might be more difficult, time consuming,
humiliating, and certainly more expensive to do. For every $100,000
they move, only $90,000, or $70,000, or whatever will get to where
it’s supposed to go. Can you foresee a more Stalinesque alternative,
where they simply can’t get anything out at all?

Doug: Hopefully
not. Anything is possible, and things can change so rapidly…
but I’d hate to think of what conditions would be like if they
ever became that draconian. It’d be so bad on other fronts that
there would be all sorts of even more urgent things on your mind
– Americans would get a very quick and unpleasant education
in the real meaning of Maslow’s hierarchy.

L: Like
the Mad Max-style neobarbarians at the door with a battering
ram.

Doug: Exactly
– that’s when you’ll definitely want to be in more
pleasant climes. I’d want to be watching it on my widescreen,
in comfort, not out my front window.

L: We’re
talking about extremes here…

Doug: You
know, back in the 1970s there was a spate of books published on
financial privacy. In those days, financial privacy was still possible.
Now, it’s not only no longer truly possible, short of embracing
a completely outlaw lifestyle, it’s very dangerous to write
about it or even talk about it. I kid you not. These days, people
who ask too many questions about privacy techniques may well be
government stooges…

There’s
lots of handwriting on the wall. All those books on financial privacy
were published in the ’70s – if you look on Amazon, you
can still find them. But there’s nothing really worth reading
that’s been written on the subject in 20 years. It’s actively
discouraged by the government. I could name – but I won’t
– at least two authors who got themselves into a real jackpot
this way. Forget about the First Amendment.

In fact, I
even feel uncomfortable talking about it in this interview.

So let me
once again emphasize that I advise everyone to stay fully within
the bounds of the law.

That’s
not for moral reasons, of course; there is no morality to the law.
It’s strictly for reasons of practicality. Risk-reward ratio.

L: Understood.
Loud and clear. Any more investment implications, besides foreign
real estate, that you want to draw attention to here?

Doug: Yes
– and it’s another reason for those so very clever boys
in Washington to embrace currency controls. They will be disastrous
for the US economy, but there’s a very good chance that, in
the short run, they’ll be very good for the stock market. That’s
partly for the reasons I already mentioned about it temporarily
boosting US exports, and hence earnings of US exporters, but also
because all that money that can’t leave the US will have to
go into something.

Investors
will probably want to put it into equity rather than debt while
the dollar is depreciating. Again, it’s disastrous over the
long term, but as a short-term play, buying the blue chips the day
the exchange controls are instituted could be a good move.

L: You’d
buy the Dow?

Doug: I
might, if I couldn’t think of anything more intelligent or original
to do. We’ll just have to see what the situation is like.

L: Thanks
again, Doug – you’ve given us a lot to think about.

Doug: My
pleasure.

You can learn
more about expatriating your wealth from Doug Casey, as well as
four other economic experts, at 2 p.m. EDT on Tuesday, April 30.
Casey Research will premier a special web video, Internationalize
Your Assets. This webinar is a must-see event for
anyone interested in protecting at least some of their assets abroad.
For
details and to sign up, click here.

April
30, 2013

Doug
Casey (send him mail)
is
a best-selling author and chairman of Casey
Research, LLC., publishers of Casey’s
International Speculator.

Copyright
© 2013 International
Man

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